Illinois Renters Caught in Foreclosure: What Are Your Rights?
A new Illinois law allows a tenant whose landlord has lost the rental house through foreclosure to stay in the home longer.
If you are a renter in Illinois caught in the crossfire of a foreclosure, a new state law can help you stay in the home through the end of your lease or, if you have a month-to-month or week-to-week agreement, provide you with some much needed extra time to find another place to live. Read on to find out how this legislation is meant to protect Illinois renters who are often innocent victims when their landlord goes through a foreclosure.
(To learn the ins and outs of the foreclosure process, visit our Foreclosure Center.)
How Foreclosure Works in Illinois
In Illinois, foreclosures are judicial, which means the lender must foreclose through the state court system. The lender initiates the foreclosure by filing a complaint and having it served on the borrower, along with a summons to appear in court. The lender also records a lis pendens in the county records.
(Learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, in Nolo’s article Will Your Foreclosure Take Place In or Out of Court?)
(To find out more about foreclosure laws in Illinois, see Summary of Illinois' Foreclosure Laws.)
New Law Protects Renters When the Landlord Goes Through Foreclosure
On August 21, 2013, Illinois Governor Pat Quinn signed Senate Bill 56 (SB 56), which was codified at 735 ILCS 5/9-207.5, a new law protecting Illinois renters in foreclosed properties. The law requires anyone who acquires residential property through a foreclosure to honor their tenants’ existing leases or provide sufficient notice so the renters can find new housing.
Specifically, the law states that, in the case of a foreclosure, the landlord may terminate a bona fide lease only:
- at the end of the term of the bona fide lease, by no less than 90 days' written notice (though if the buyer at the foreclosure sale intends to occupy the property as a primary residence, the lease can be terminated with 90 days' notice) or
- in the case of a bona fide lease that is for a month-to-month or week-to-week term, by no less than 90 days' written notice.
What Is a Bona Fide Lease?
A bona fide lease means a residential lease in which all of the following are true.
- The mortgagor (borrower) or the child, spouse, or parent of the mortgagor is not the tenant. (Though a child, spouse, or parent of the mortgagor may prove by a preponderance of evidence that a written or oral lease is a bona fide lease.)
- The lease was the result of an arms-length transaction.
- The rent in the lease is not substantially less than fair market rent for the property or the rent is reduced or subsidized pursuant to a federal, state, or local subsidy.
- Either the lease was entered into or renewed (1) on or before the date of the filing of the lis pendens or (2) after the date of the filing of the lis pendens and before the date of the judicial sale of the residential real estate in foreclosure, and the term of the lease is for one year or less.
(Learn more about specific Illinois Foreclosure Laws and Procedures.)
SB 56’s Relationship to the Federal Protecting Tenants at Foreclosure Act
Prior to 2009, most renters lost their leases if the landlord went through foreclosure. Generally, the rule in most states was that if the mortgage was recorded before the lease was signed, the lease would be eliminated in the foreclosure. As a result, tenants in foreclosed buildings became a month-to-month renters, and the new owner could then terminate the tenancies after providing proper notice according to state law. (Learn more in Nolo’s Evictions and Terminations area.)
Then on May 20, 2009, President Obama signed into law the Protecting Tenants at Foreclosure Act. Under this Act, the tenant was permitted to stay at least until the end of the lease, and month-to-month tenants were entitled to 90 days' notice before having to leave the property. (Though if the buyer at the foreclosure sale intended to occupy the property, the lease could be terminated with 90 days' notice.) Unfortunately, the Protecting Tenants in Foreclosure Act of 2009 expired on December 31, 2014. SB 56, however, still applies. (To learn more about tenant’s rights in foreclosure, read Nolo’s article Renters in Foreclosure: What Are Their Rights?)
For More Information
In 2012, Governor Quinn introduced the Illinois Foreclosure Prevention Network (IFPN), a free resource, to help struggling homeowners through the foreclosure process and evaluate various options for staying in their homes. While the IFPN is geared to help homeowners, renters too may benefit from the service. Visit the IFPN website at www.keepyourhomeillinois.org or call the hotline at 855-KEEP-411 if you have questions about foreclosure.
To learn more about tenants’ rights, see Nolo’s Renters' & Tenants' Rights area.
For more articles on foreclosure in Illinois, visit our Illinois Foreclosure Law Center.